Wellen: A TIF that will pay off for Marlborough

Friday

Nov 28, 2008 at 12:01 AMNov 28, 2008 at 8:11 PM

At a December meeting, the City Council will have an opportunity to reinforce the City's status as a community actively engaged in soliciting valued commercial and industrial expansion. They will be deciding on whether or not to approve a Tax Increment Financing Agreement between the City and Sepracor Inc.

Tom Wellen, Guest columnist

At a December meeting, the City Council will have an opportunity to reinforce the City's status as a community actively engaged in soliciting valued commercial and industrial expansion. They will be deciding on whether or not to approve a Tax Increment Financing Agreement between the City and Sepracor Inc.

Having a significant and diverse commercial and industrial tax base within the city is vital to the Marlborough's economic stability and reduces the tax burden that would otherwise fall on the City's residential population. It allows the city to maintain the high level of municipal services we have all come to expect through all phases of the economic cycle.

Commercial properties require less overall services from the City and create a multiplier effect by paying salaries that are spent locally to support other businesses. Even though commercial properties require less municipal services, the City of Marlborough employs split tax rates which assess higher taxes to commercial properties than to residential properties, $24.58 per thousand in fiscal year 2008 for commercial versus $12.72 for residential. For fiscal 2008, the commercial and industrial properties accounted for 25 percent of the taxable value in the city, yet were assessed 40 percent of the tax levy.

Many or the neighboring communities do not have higher commercial tax rates, making it difficult to compete with them for new commercial growth. For example Westborough's commercial tax rate is $14.70 as compared to the previously mentioned $24.58 Marlborough rate.

The Tax Incremental Finance agreement (TIF) is an economic development tool made available to the city by state law and local legislative action. It is an incentive for businesses to locate, remain and expand in the city. The city enters into a formal agreement with the property owner and agrees to exempt, for tax purposes, a portion of the new value resulting from new construction and improvements. The amount of taxes being paid on the property prior to the improvements remains in full effect. The exempt amount is on a sliding scale over a number of years until 100 percent of the new value becomes completely taxable.

Not only is this an effective development tool at the local level, but any property awarded a TIF by the local government becomes eligible for significant investment tax credits from the state which are available only to TIF sites. These tools combined allow Marlborough and Massachusetts to compete in the global race for jobs.

Sepracor is a rapidly growing, world class research-based pharmaceutical company. Its world headquarters are currently located on Waterford Drive in Marlborough. It is a world leader in its industry and employs more than 600 people at its Marlborough locations. Having a major biomedical company located here is a magnet drawing other biomedical firms to the city. These industries tend to cluster in areas where the major players locate, attracting high wage, educated workers and smaller startup companies as well.

Sepracor currently has one building on its 56-acre site valued at $15 million paying close to $400,000 in city taxes annually. The proposed TIF agreement covers a second building on the site with an expected value of $30 million opening in 2009 and a planned third building estimated at $17 million in value with an expected occupancy date of 2014.

These two planned buildings will generate additional annual taxes to the city, based on the estimated values and today's tax rate once fully taxed, of just under $1.2 million. This is in addition to the taxes currently being paid on their existing building.

The sliding scale starts at 100 percent exemption in the first year, typically while still under construction, to 10 percent in the last year and extends for a ten year period. During the exemption periods the estimated new taxes collected will be $6.8 million.

The city has previously executed TIF agreements with 3Com, Cytec, Boston Scientific and now with Sepracor. These actions tell the industry leaders, commercial brokers, developers, and state and federal development agencies that Marlborough is a ready, willing and able partner for smart development.

There is a high level of competition between communities for commercial development and Marlborough must remain aggressively engaged in attracting and retaining industry leaders such as Sepracor. We should continue to use TIFs and other appropriate economic development tools to strengthen our commercial tax base.

The mayor and City Council president should be applauded for their efforts to bring this proposal to the Council for action. And the City Council should endorse the cooperative agreement with Sepracor for the sake of our City and for our residents for generations to come.

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